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19 Responses to “This Housing Recovery Is Different: Big Investors Are the Buyers”

I guess they think that any margin achieved on rental income will more than cover maintenace and upkeep? And that increasing housing value/price will more than cover total outlays? Just wait until the house needs a new roof.

I dunno. On a “personal investor basis,” I think this can work on a sweat equity basis, and there can be some pretty nice tax dedcuions. But at scale?

Smoke and recover mirrors basically…this will not have a positive outcome either. Proof that the housing market recovery is a charade. Until incomes rise and inequality is squashed, we will not see a real recovery in the housing market or for that fact a real recovery on Main Street.

There are a lot of potential problems with the amount of RE investors now in the market, but that was an inane segment. There’s a reason that there are a lot of companies that exist to manage properties, because it is lucrative at scale. You probably won’t be pulling in huge margins, but it doesn’t appear most of the new players are looking to pull in huge margins, they are looking for relatively steady cash flow and RE makes great sense as a yield play. If you don’t need your capital back the chances are that real estate will be a good play.

Where this becomes tricky is it is really hard to sort out how many of these new players will want their capital back in the short term or if rates start to rise and they think they can get better yield elsewhere.

if you pass on the latest bubble flavor,or avoid housing cause its not a “real” investment you will miss out this whole recovery will have major bubble aspects or you can sit and wait for a real fundamentals based investment
good luck with that!
just dont be too late getting out

of course
what is there to invest in thse days but bubble
the extreme version being your TBTF or my recent bad timing Fannie
if you stayed out of the bubble so far you probably missed more than half its eventual run
to the next business cycle peak

this aint “jumping”necessarily
you might want to be in years till the economic peak
i would not advise anyone but a trader to trade the coming end of QE for example

I cannot speak to RE investing at a large scale, but having been initially forced into the role of landlord, I have come to appreciate this asset at least as much as any other. For a lowly wage-serf, the cashflow, tangibility, and relative stability of value are an appealing set of positives. Will prices crash again? Probably. But as with equities, how relevant these crashes are depends on the timeframe involved. In fact, if the market tanks again, it’s more likely I’d add to our real estate position, rather than liquidate.

there is still a business cycle, and the market will likely continue it to follow it
you can cyclically time that a la zaulauf and ” jump off”
even with no “bubble” or not much–grey area
still a good rule even if the recovery is massively third world style bubble enhanced
that make sense?

Oh, I think housing is recovering at the consumer level… no reason to keep looking for excuses that it is not. Builders are building again, people are shopping, asking prices are rising. “Recovering” never means “all the way back”; it means exactly what it says.

So, the obscenely wealthy destroy the economy, we lose our jobs, we bail them out, they foreclose on our house, they then use our bailout money to buy our house cheap, and then we rent our houses from them?

“Foreclosures have slowed dramatically over the last year. Banks are worried about getting sued. They’re being much more careful. They’re much more aggressive with loan modifications.

But lest we forget, there are three million households who are either seriously delinquent or started a foreclosure process. At some point, the pig is going to get out of that python. And when it does, it will add to inventory. And when that happens, we will see a price – the price increases will start to moderate substantially.”

However, I think they miss a couple of important things here with respect to mortgage investing:

1. FICO, debt-income etc. don’t measure the likelihood that somebody will lose their job or have a serious illness after you give them a mortgage.
2. The purpose of a decent loan to value ratio is not really to prevent default, but to make sure you can get your money back if they do default and you foreclose.Although it will give the homeowner more skin in the game unless he is underwater.
3. Even an 80% loan to value ratio won’t cover you if the housing prices tank 30% or more because of a housing bubble.

It looks to me like somebody is trying to come up with an apologia that high rates of foreclosure and losses are not forecastable.

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About Barry Ritholtz

Ritholtz has been observing capital markets with a critical eye for 20 years. With a background in math & sciences and a law school degree, he is not your typical Wall St. persona. He left Law for Finance, working as a trader, researcher and strategist before graduating to asset managementRead More...

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